Post on 04-Apr-2018
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Wil l ie James Mandr el l , III
2 5 Things You MustKnow Befor e Buying
Your Next
M ul t i- Fa mil y Home
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1. Hire the right Realtor 22. Whats on your report? 23. Not all lenders are created equal 24. Government buying incentives 35. Prepare your checklist 36. Research your neighborhood 47. Whats your market rent? 48. Understanding the cycle 49. Buying out of town 510. Its a business 511. Take notes 612. Patience is the key! 613. Know the law 614. Evaluate your income 715. Evaluate your expenses 716. Understanding foreclosures 817. Google Earth 918. Converted spaces 919. Simple structure & construction 1020. A note on short sales 1021. Lets talk taxes 1122. Get a C.L.U.E 1123. Negotiating the offer 1224. Hire a good home inspector 1225. Are you ready to become a landlord? 13
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2. W hat on your report?
There are three major credit companies thatoffer you free access to your credit score:Experian, Trans-Union, and Equifax. Thesecompanies will give you a detailed breakdownof your credit situation. However, each reportmay not be identical. Since these reports arefree, its in your best interest to get all threeto be sure that you see the complete picture.When looking over the documents, double-check that your personal information isaccurate. Beware of information that does notpertain to you or looks as if it might be
fraudulent. It will be to your benefit to knowwhats on these reports so you can handleany issues that may slow you down later in
the home buying process.
1. Hire the right realtor
The Realtor you choose to work with during the home buying process can make or breakyour overall experience. Not all real estate professionals are created equal so you should
choose one who can provide you with the type of service that will meet your goals. If youare looking to purchase a multi-family home search for a Realtor who is familiar with theneighborhood where you are buying and who has a good understanding of the specificproperty type youre interested in. A good Realtor will be able to guide you through thebuying process step by step and ensure your overall purchase runs smoothly. Rememberthat purchasing a multi-family home is no small task, so you should be working with aprofessional who has the knowledge to do the job right.
3. N ot al l lenders are created equal
There are a variety of different lenders to choose from. Each one has something slightly
different to offer you. Consider applying to several different types of lenders from the largecommercial banks to your local mortgage broker so you can evaluate the different types ofoffers presented to you. As you speak with each one ask about their rates, loan terms,qualification process and down payment requirements among other things. While you maynot like what one lender is offering, another may fit your needs perfectly.
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5. Prepare your checklist!
If youd like to walk away at the endof your purchase with everything youwant, create a checklist of property
criteria. At the start of the buyingprocess you should write downeverything your ideal property wouldhave as well as everything itwouldnt. This written list should beregularly reviewed while yourevisiting properties with your Realtorto see where each property matchesup. Try to be as detailed as possiblewith your criteria. You want your listto include everything from thenumber of bedrooms youd like ineach rental unit to the height of theceilings. A properly written checklistallows you to avoid making irrationaldecisions while evaluating propertiesand will also help you to act quickly ifa good deal presents itself.
4. Governme nt buying incentives
If you know where to look you can frequently find financial incentives available to homebuyers. The federal and local governments often have special programs and grants for low
income buyers, seniors, and first home buyers. These incentives range from down paymentassistance to financing opportunities with special rates or terms. There are also incentivesfor investors if youre willing to buy within a certain area, rehab older structures, or providehousing to low income renters. During your search for financing you should also be searchingfor incentives that may be available to you.
Here are a few good websites to start your search:
Housing & Urban Developmenthttp://www.hud.gov/local/index.cfm?state=ma&topic=homeownership
Mass Housing
https://www.masshousing.com/
The City of Boston Housinghttp://www.cityofboston.gov/residents/housingAndProperty.asp
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6. Research your neighborhood
Understanding the neighborhood where you want to buy may seem obvious, but somebuyers underestimate its importance. Before getting started with the house hunting, do alittle neighborhood hunting first. There are a number of resources online, such as municipalweb sites as well as forums that you can use to find out about prospective areas. To helpyou determine if a neighborhood will be a good fit for you, try taking a walk in the area,visiting the local facilities, and getting to know some of the residents. You may also want tocheck out the area at different times of the day to see how things may change. A little extrawork before the purchase can really make the difference in the end.
7. W hats your market rent?
If you plan to purchase a multi-family home andrent out one or more of the units, its crucial youunderstand your rental market. Dont assumethat because the property you want to purchaseis currently being rented for a certain amountthat this income will hold true for future tenants.Before you purchase any rental property youshould research what other similar units arerenting for in the area and how that comparesto your prospective property.
8. Understanding the cycle
Real estate is a constantly evolving market that swings to favor either the buyer or the seller hence the terms buyer's market and seller's market. While negotiating a purchase priceon a home, it's important to know which of the two markets youre in and which direction themarket is trending towards. A sellers market is one where homes are selling quickly andprices are increasing, while a buyers market is one where homes are taking longer to sell
and prices are holding steady or declining.
A good understanding of your real estate market can really help you while negotiating withthe seller. In a buyers market you may want to continue exploring other options rather thanpay a particularly high price on a property. Conversely, in a sellers market you mightconsider paying a premium to avoid losing out on a home you really want. You should talk toyour real estate agent about current market conditions and where things seem to be headed.
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11 . Take notes
This one is self explanatory. You are going to be visiting a bunch of homes and taking in a lotof information. It will be virtually impossible to remember every last detail of every property
you visit. While searching for homes with your Realtor, you should always take notes andpictures when possible. Keep a log of what properties youve seen and the photos to go withthem. These combined records will come in handy when you need to quickly refer back tosomething to make a decision.
12 . Patience is key!
Perhaps you will find the perfectproperty this week or maybe it willtake a little longer. Some buyers find
exactly what they are looking forright away, while others have to do alittle more waiting to find the rightproperty. Whether youre a first-timehomebuyer or an experiencedinvestor, it's always a good idea tobegin the process with anunderstanding that good things reallydo come to those who wait. You maysee a number of homes, takenumerous photos, even make anoffer or two, but patience may verywell be the key to finding theproperty youre really looking for.New homes come to the market daily- tomorrow may be the day yoursbecomes available.
13 . Know t he law
When you become a landlord, you and your rental property are subject to certain federal,state and local laws. Before you hop right into the purchase of a multi-family home, take
some time to educate yourself on your responsibilities as a landlord and property owner. Youshould become familiar with whats required of you as the landlord, as well as what you can
expect from your tenants. Every Landlords Legal Guide is a great book for new landlords andcovers all the required legal topics you will need to get up to speed. If, after doing someresearch on your own, you still have questions about your responsibilities as a landlord youshould consult your real estate attorney for more guidance.
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14 . Evaluate your income
The amount of income you can generate
from a particular property should be oneof your primary concerns when choosingwhich rental property to buy. Whetheryou are purchasing a 2 family home or a20 unit apartment building, the totalrental income that the property canproduce will be a major factor in howthat property matches up to othersyouve seen. You will want to have aclear understanding of market rents inyour area and if possible, the specificrental history for the property you are
buying.
15 . Evaluate your expenses
Understanding the expenses of aprospective property is just as importantas your knowledge of the income beingproduced. Your property may begenerating a terrific amount of incomebut actually losing money overall due toout of control operating costs. Whileyoure evaluating properties to purchasetake note of the operating expenses of
each and how they compare to otherproperties. Insurance, property taxes,utilities, and general maintenance costsare some of the expense items youshould become familiar with. You willalso want to know whether the utilitiesare shared throughout the home or if thetenants are responsible for paying theirown.
Like any business, the effort you put in and t he kn ow ledge
you obtain w ill ult ima tely dete rm ine the success you
achieve.
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16 . Understanding foreclosures
Foreclosures are homes that have been repossessed by a bank, typically because theowner(s) have failed to pay their mortgage. Since banks do not want to be in the business of
owning homes, they will quickly try to re-sell any repossessed properties often at asignificant discount, and will potentially go for 20-40% under market value. Purchasing oneof these bank owned properties can be a great way to find yourself an unbeatableinvestment opportunity, but there are some things you should take into consideration:
1 . Purchasing a foreclosed property can be time consuming. Making offers and closing onthese homes can take longer because you are working with a bank rather than one individualseller making decisions.
2 . Often, foreclosed homes are vacant and in need of considerable repair to make themhabitable.
3 . There are some loan programs that will not allow for the purchase of foreclosed homes.Before making offers on foreclosed properties, you should speak with your lender to becertain that your loan will allow for this type of purchase.
4. There is also the consideration of your ability to pay for the purchase. Often foreclosedproperties must be paid for in cash, so be sure you have the available credit.
If you have any interest in purchasing a foreclosed home in your area, you should consultyour Realtor for list of available properties. Your Realtor will also be your best source for
leads on future foreclosed homes as they become available.
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17 . Google Earth
You can save yourself a lot of time and money by learning to utilize the tools available to youvia the internet. Google Earth is a great resource for homebuyers researching potential
properties to purchase. Once youve downloaded the free program, you can simply type inthe street address of a property you are considering and get multiple views of the location.You can see the home from a birds eye view, from a street level perspective and multipleother angles. Once youve seen the property, take an online tour of the neighborhood. Whatis the condition of other homes on the street? Is there street parking? Does theneighborhood look crowded? Is the house on a busy street? Is the home really in walkingdistance to public transportation? By simply clicking your mouse and taking a virtual walkaround the neighborhood, these are just some of the many questions Google Earth cananswer for you.
18 . Converted spaces
Finished Basements and Attic Conversions in certain homes can be tricky. Before you makea home purchase, ensure that these rooms are legal according to local laws. Sometimes aseller has made improvements without pulling proper permits with the city or town. In somecases the lack of proper permits will make the additional space unrecognizable to themunicipalities and can cause you headaches in the future. You can consult your Realtor forhelp determining if permits for the improvement project were obtained and check with yourhome inspector to make sure everything is up to code. If youre planning to have tenantsoccupying the converted space, its crucial to make sure that the extra space is legal and up tocode.
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19 . Simple structure / construction
Whether youre planning to purchase a multi-family home as your primary residence or as an
investment property, consider the overall structure of the home. When evaluating eachproperty, note the complexity of the construction. While you definitely want a home thatseye-pleasing to neighbors and potential renters, you dont want a home that may beexpensive to maintain. Look for properties that have simple, solid construction, and userelatively standard materials. These are generally the easiest and most inexpensive tomaintain.
Here are some questions you may want to ask yourself when evaluating each property:
How steep is the roof? How many angles does the building have? Does the home have a slate roof?
How complex is the landscaping? How many different exterior paint colors are there? Does the home have any special features that may be difficult to replace at
the local home improvement store?
20 . A note on short sales
A short sale takes place when the seller and lender have agreed to sell a home for less thanwhat is owed on the mortgage, letting the lender pay the difference. There are generally two
reasons why the bank would grant a homeowner a short sale: the seller has had a hardship,or the seller owes more on the home than the home is worth.
As a buyer or rental investor, you could potentially be purchasing a short sale for a deeplyreduced price compared to the market value of the home. Similar to foreclosures, short salespresent buyers with great opportunities but there are some things you should be on the lookout for:
1. The entire short sale process can be lengthy and take 30 to 120 days to complete orlonger.
2. The ultimate decision as to the price the home sells for is up to the bank. Sometimes youcan make an offer that the seller accepts but that the bank later rejects.
3. Short sales can be very involved and complex transactions. Be sure to hire a Realtor whois familiar with this type of buyer representation.
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21 . Lets talk taxes
Rental real estate provides more tax benefitsthan almost any other investment. The more
you understand about these tax breaks themore you can take advantage of them. Beforeyou buy your first income property you shouldintroduce yourself to a CPA and learn how toyour tax situation will change after thepurchase. A real estate CPA will be able toprovide guidance on the income and expenserecords you should be maintaining, thedifference between current and capitalexpenses and how to minimize your taxliability every year. If you are currently filingyour taxes with a national franchise service orlocal preparer without any real estate
knowledge, stop! Find a CPA familiar withpreparing taxes for rental property owners.While he or she may initially charge you a littlemore, the professional advice that you will bereceiving is certainly worth it when it comes toyour bottom line.
Dont leave everything up to your CPA. Take a proactive approach and do some research onyour own. Stephen Fishmans, Every Landlord's Tax Ded uction Guide, is a great book fornew and experienced landlords trying to stay inform about current rental tax deductions.
2 2 . Get a C.L.U.E.
Once youve found a property that fits into your criteria and has passed all of yourpreliminary inspections, you request that the seller provide you with a CLUE report. CLUEstands for Comprehensive Loss Underwriting Exchange. The report is similar to a creditreport for a home, and contains all the pass insurance claims taken out against the property.The report covers a 5 year period and will show you if the property owner has filed a claimfor fire, water damage, mold and various other types of potential lose.
Having this record of the propertys past insurance claims is a good way to determine thefuture insurability of the home and to gather a better understanding of the homes history. A
long report may reveal some trends that lead you away, while a clean report can provide thecomfort you need to move forward with the purchase.
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24 . Find a good hom e inspector
Knowing the condition of the house and all theunits you are going to purchase cannot be leftto appearances or promises. Some undetectedproblems can be more costly than the price of
the house itself. Making sure you have theservices of a knowledgeable & professionalhome inspector can prevent what should be agreat investment from becoming a financialdisaster.
Though experience is always a good indicatorof qualifications, consider hiring an inspectorwho also has a background in multi-familyhomes and is familiar with the area whereyour property is located. While the costsinvolved in purchasing a new home can add upquickly, the temptation to skimp when hiring a
home inspector should be resisted. If aserious problem with the property goesundetected, what should be your greatestinvestment may turn out to be your greatestliability. Have your Realtor provide you withthe number of a good home inspector.
23 . Negotiating the offer
When it comes to buying a home, the ability and willingness to negotiate is a must. Ingeneral, sellers ask for more than they are actually willing to accept and buyers offer less
than they are actually willing to pay. As the buyer, you will have the best chance at asuccessful negotiation if you research the price of other comparable homes in the areabefore making your offer. The best way to determine what you should pay is by consideringwhat other buyers in the area have paid for similar properties. Your Realtor will be able toprovide you with a comparable market analysis for the prospective property, which will assistyou in finding these recent sales figures.
Lastly, be realistic when youre ready to put in your offer to buy. Nothing will hurt yourchances of future negotiations more than insulting the seller with a low-ball offer. Rememberthat the trick to landing yourself the best deal is to find the balance between your high-watermark and the sellers low-water mark. You want to work with the seller to find a point whereboth parties come out feeling good about the transaction. You should also remember thatnot every offer is accepted, so don't be disheartened if your first offer isn't a winner. In most
cases, the seller will make a counteroffer for your consideration and negotiations cancontinue from there.
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25 . Are you ready to become a landlord?
Throughout the buying process you should be preparing yourself for the tasks that
come with being a landlord. Whether youll be a first time landlord, or you alreadyown several rental units, once the purchase is made, youll be required tomanagement your property and tenants. Unless you plan to hire a propertymanagement company to take the task off you hands, here are some things toconsider.
1. Opening a separate checking account just for your rental property business. Youllwant to have details records of income and expenses come tax time and separatingyour rental business from personal business will make you job a lot easier.
2. Get names and numbers for a good local plumber, electrician, and generalcarpenter and get familiar with them. Dont wait until theres a need and be force topick and random contractor from the phone book.
3. As a landlord you will want to keep up to date on home value trends, rentalmarket news, property management news, local law changes, and more. Find alocal, reliable information and news resource and follow it regularly.
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As a lifelong resident of Boston, Willie is very familiar with the citys neighborhoods and has adeep understanding of the local real estate market. He spent his early years watching his
grandparents acquire and manage rental property throughout the city and was able to learn many
aspects of the business early on. Now, as a current landlord and real estate investor, he prides
himself on staying current with local sales and rental trends.
Prior to entering the real estate field, Willie spent several years working in the banking and
financial services industries, for firms such as Bank of America and Cantella & Co., Inc. During
his corporate years he earned many industry licenses and gained valuable experience evaluating
the risk and rewards of various investment assets, including real estate. Willie earned his
Bachelor's degree from Northeastern University and is currently working on his Masters in
Business at Suffolk University.
Willie has a real passion for the multifamily industry and specializes in representing buyers and
sellers of local income property. He strives to share his knowledge and experiences with every
client and make every buyer and seller representation a pleasant and rewarding experience.
Wil lie James Mandrel l , I I I
Realtor, Notary Public
P: 617-2 97-864 1
F: 617 -849-56 79Willie@AtHomeBoston.com
www.BostonCashFlow.com
Twitter: ww w. tw i t te r .co m/ wjm an drell
Facebook: ww w.facebook.com/ wm andrel lYouTube: ww w .youtube.com/ wm andrell
Linked I n: ww w . linked in .com/ in/ WJMandrel l